Estimating Consumer Surplus in the Censored Linear Model
Land Economics, Vol. 68, No. 1 (Feb., 1992), pp. 83-92
11 Pages Posted: 24 Feb 2016
Date Written: February 22, 1992
The TOBIT estimator of the linear model is commonly used to control for censoring. However, when predicting either demand or consumer surplus, simply substituting the resulting coefficient stimates back into the linear functional form is incorrect. This failure stems from the non-linear impact of variations in cut-off price in an otherwise uniform population. Several techniques that recognize this potential problem are recommended. The performance of these recommended techniques is investigated with a Monte Carlo simulation.
Keywords: consumer surplus, tobit, censoring, linear functional form
JEL Classification: C24, D61
Suggested Citation: Suggested Citation